Since Minister of Finance, Colm Imbert delivered his first fiscal package in October 2015, the government has spent, or allocated to spend, approximately $476 billion in the nine fiscal years to 2024.
Transfers and subsidies usually command a majority of Government expenditure, with Sunday Business Guardian estimates putting the total spending on that allocation amounting to an estimated $252 billion between the 2016 and 2024 fiscal years.
Generally, transfers and subsidies account for more than half of all the money spent by the Government in a fiscal year.
In the 2023 fiscal year, according to the provisional numbers in the 2023 Review of the Economy budget document, the Government spent a total of $57.23 billion, $32.63 billion allocated to transfers and subsidies. That is 57 per cent of the total expenditure.
In the 2022 fiscal year, 56.44 per cent of the total budget was spent on transfer and subsidies...$30.07 billion out of $53.27 billion.
And in 2021, $26.87 billion was spent on transfers and subsidies, which was 54.17 per cent of the $49.61 billion spent in that year.54 per cent of the Transfers to households is the largest annual transfer cost for the government.
Transfers to households include several key social programmes. According to the 2022 review of the economy, some programmes that fall under this item are pensions and gratuities, senior citizens grant, social assistance, disability grant, and the food price support programme. Another significant programme listed under this item is the Government Assistance for Tuition Expenses (GATE).
The year 2020 indeed marked a year during which when transfer to households saw a significant jump as a result of the COVID-19 pandemic.
The review stated, “Transfers to households ($10.24 billion) represent the largest share of expenditure under transfers and subsidies. The nine per cent increase of $849.5 million, as compared to fiscal 2019, is mainly attributed to higher than anticipated expenditure consequent to the Government’s socio-economic response to the COVID-19 pandemic. Specifically increases were recorded under the senior citizens grants (from $3.84 billion to $4.06 billion), disability grants (from $565.7 million to $610.0 million), social assistance (from $356.9 million to $514.0 million), food price support programme (from $153.1 million to $314.6 million) and salary relief grants (amounting to $226.3 million).
However there have been moves to reduce this amount over time and indeed in 2021 there was a decrease as the review said, “In fiscal 2021 and are estimated at $9,836.7 million; $250.4 million lower than the previous year’s total of $10,087.1 million.”
However, that review did note, “This decrease in expenditure largely reflects the reclassification of items previously recorded in this category.”
The item did rise again in 2022 as the economic review stated, “Transfers to households, which includes payments for pensions and gratuities, senior citizens grant, social assistance, disability grant, the food price support programme and COVID-19 Support, represents 34.3 per cent of total transfers and subsidies, and are estimated to have increased by 7.9 per cent to $10.45 billion in fiscal 2022; a $762.8 million increase from $9.69 billion spent in fiscal 2021. This can be attributed mainly to spending under the GATE Fund of $400.0 million and an increase in the subsidy liability relating to the sale of petroleum products.”
Economist Dr Vaalmikki Arjoon noted that most of these items did have significant impacts on the day-to-day cost of living in the country.
Using the food price support programme as an example, he noted that this had been a major help for several homes around the country.
“It helps them to cope more with an increased cost of living, especially increased cost of food. Food items, on average, the price, prices would have gone up by about 30.4 per cent from July 2019 to July this year,” Dr Arjoon told the Business Guardian in a telephone interview.
“Given the higher cost of food items, it would not have been able to purchase the same basket of groceries as it would have been able to a few years ago, especially pre pandemic.”
He also pointed out that a reduction to the GATE allocation and the subsequent addition of a means test to qualify for assistance has already changed the outlook for several families as many students are opting not to pursue tertiary education, but instead to enter the workforce.
This, he explained, often meant, they were accepting jobs at lower levels than their potential or in some cases in the alternative job market.
Dr Arjoon and another economist, Dr Marlene Attzs both said it was difficult to state what the cost of living would be with or without the items given the many categories it would cover. Attzs explained that transfers and subsidies are implemented in various sectors and as a result tying it back to a per capita cost could not be accurately interpreted.
However, Arjoon noted that typically the major focus of the budget is on subsidies, typically transfers are the larger expense.
Indeed, a review of the financial documents for the past decade comfortably supported this as typically subsidies accounted for about 1 per cent of the transfers and subsidies allocation.
However subsidised costs have consistently been addressed in the past decade, notably with adjustments to the fuel subsidy six times.
This Dr Arjoon noted directly impacted the average citizens as transport costs, both via private vehicles and public transport increased as a result. However, additionally, he said that adjustment also had the added effect of price increases on items as businesses also saw increased costs for the transportation of goods.
Another example of subsidy adjustment impacting the public was seen in inter-island transport as both ferry and airplane tickets were adjusted upward in the 2023 budget.
Still amid great concerns about the declining energy returns, there remain calls for further adjustments or removals of subsidies in the budget.
On Wednesday, while speaking at the Trinidad and Tobago Coalition of Services Industries (TTCSI) pre-budget discussion at the Little Carib Theatre in Port of Spain, the head of the Energy Chamber Dr Dax Driver once again made a call for a removal of the subsidy for electricity rates in Trinidad and Tobago.
“We have to remove the subsidy on electricity in the country,’ said Dr Driver at the event, “We’re putting incredibly cheap natural gas into the electricity sector which we could be earning a lot more foreign exchange if we put it into petrochemical and LNG sectors,” he said, “Leave the subsidies in place for the poorest households, but better-off households in the top tariff levels do not need an electricity subsidy and commercial businesses should be paying the market rate for electricity.”
Driver said the removal may not necessarily mean increased rates for the public, particularly if more emphasis is placed on reduced energy consumption drives as he estimated that T&T could reduce its usage by 40 per cent with the right adjustments. Additionally, he said the removal of the electricity subsidy would aid the necessary push for renewable energy in the country.
